China Keeps Pumping Liquidity Into Markets Amid Evergrande Debt Crisis
China’s central bank has injected even more short-term liquidity into its financial system, as concerns over a potential Evergrande collapse mount.
The People’s Bank of China added another 90 billion yuan into its banking sector via reverse repurchase agreements on Wednesday, following a similar short-term cash injection on Friday and Saturday. Combined, the central bank has now pumped a total of 120 billion yuan (US$18.6 billion) into financial markets, in an effort to soothe concerns over Evergrande’s debt crisis.
The heightened need to calm market worries comes as Chinese-based equities faced significant losses around the globe, as investors observed an ominous liquidity crisis unfold at Evergrande, one of China’s largest property developers. The Hang Seng China Enterprises Index— an indicator of Chinese shares trading in Hong Kong— plummeted to the lowest in two months at the beginning of the week. Similarly, the benchmark CSI 300 index slid nearly 2% on Wednesday.
In the meantime, Evergrande released an exchange filing on Wednesday, revealing it had successfully arranged a plan with bondholders to make interest payments due Thursday on domestic yuan bonds. According to data compiled by Bloomberg, the interest owed on the 5.8% 2025 bonds currently sits at around 232 million yuan. The latest promise to meet its debt obligations comes as the real estate developer failed to make interest payments due Monday to two of its major creditors.
News of Evergrande’s commitment to pay Thursday’s debt payments came as a relief for global markets. The S&P 500 rose 1% on Wednesday, putting the index on course for its best trading day in nearly two months. Likewise, the Nasdaq Composite jumped 0.8% on the news. Europe’s Stoxx 600 index was also up 1%, while UK-based FTSE 100 accelerated 1.5%.
Information for this briefing was found via Bloomberg and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
